Asian shares sagged on Thursday after a retreat on Wall Street and falling crude oil prices rekindled investor anxiety over slowing global growth, while a mixed picture on Chinese manufacturing failed to impress markets.

Japan’s Nikkei share average fell 0.5 per cent, while MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.2 per cent.

China’s purchasing managers index

The flash HSBC/Markit manufacturing purchasing managers’ index (PMI) edged up to a three-month high of 50.4 from a final reading of 50.2 in September, and just a hair’s breadth from the 50.3 reading forecast by analysts.

But the level of output in factories fell to a five-month low of 50.7, just above the 50-point level that separates growth from contraction on a monthly basis, underscoring a cooling economy.

“While the manufacturing sector likely stabilised in October, the economy continues to show signs of insufficient effective demand,’’ said Hongbin Qu, chief economist for China at HSBC.

Wall Street shares

Prior to the Chinese PMI, Wall Street shares slid on Wednesday after big gains in the past few days.

Energy companies were hit by a fall in oil prices, while earning results from companies such as Boeing and Biogen Idec failed to meet investors’ lofty expectations.

In addition, a shooting incident at the Canadian parliament in Ottawa unnerved investors.

Crude oil prices

Oil prices flirted near multi-year lows hit last week, as data showed a second consecutive weekly jump in US crude stockpiles.

The US Energy Information Administration said crude oil stocks rose by 7.11 million barrels, more than double the 2.7 million barrel increase analysts had expected.

US crude futures slipped in Asia, extending its 2.8 per cent fall on Wednesday to trade at $80.46 per barrel, near two-year low of $79.78 hit last week.

“I think it will take some time before markets calm down. Market sentiment is still fragile. The market has realised that the US economy cannot be decoupled from sluggishness in the rest of the world,’’ said Tsuyoshi Shimizu, chief strategist at Mizuho Asset Management.

“But on the other hand, I think the market is now going to the other extreme in betting on recoupling of the US and the rest of the world,’’ he added.

Global economy

The fall in oil prices underscored worries over the health of the global economy.

Turbulence has gripped global markets in recent weeks on anxiety about slowing world growth. In particular, investors have been rattled by the threat of deflation and recession in Europe and the Chinese economy cooling to its weakest in over five years in the third quarter.

A string of manufacturing reports from Europe due later in the day will give investors another chance to gauge the pulse of the world economy.

US consumer prices

In the United States, a mild rebound in US consumer prices in September reduced some bets the Fed might postpone possible plans to raise rates in 2015, keeping US Treasuries in check.

The 10-year U.S. Treasuries yielded 2.208 percent , having risen as high as 2.250 per cent on Wednesday.

The data also helped to lift the U.S. dollar against other currencies. The euro dipped to $1.2674, near its lowest level in more than a week, having slipped from $1.28875 marked on Wednesday last week.

The euro was not helped by anxiety that some European banks may fail stress tests by the European Central Bank, the outcome of which is due on Sunday. Spanish news agency EFE, citing unnamed financial sources, said 11 banks were set to fail.

The dollar also ticked up to 107.18 yen, up about a full yen from Tuesday's low of 106.15.

Elsewhere, the New Zealand dollar tumbled 1.0 per cent to $0.78749 following data showing consumer price inflation in New Zealand slowed in the third quarter.

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